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Nature or Nurture? Learning and Female Labor Force Dynamics

  • Laura Veldkamp

    (Stern School, NYU)

  • Alessandra Fogli

    (Minneapolis Fed, CEPR)

In the last century, the evolution of female labor force participation has been S-shaped: It rose slowly at first, then quickly, and has leveled off recently. Central to this dramatic rise has been the entry of women with young children. We argue that this S-shaped dynamic came from generations of women learning about the relative importance of nature (endowed ability) and nurture (time spent child-rearing) in determining children's outcomes. Each generation updates the beliefs of their parents, by observing others' outcomes. When few women participate in the labor force, most outcomes are uninformative about the effect of labor force participation and participation rises slowly. As information accumulates and the effects of labor force participation become less uncertain, more women participate, learning accelerates and labor force participation rises faster. As beliefs converge to the truth, participation flattens out. Learning offers a rational explanation for the differences in employment preferences that have been the focus of a large empirical literature. Survey data, wage data and participation data support our story and distinguish it from alternative explanations.

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Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 1021.

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Date of creation: 2007
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Handle: RePEc:red:sed007:1021
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Web page: http://www.EconomicDynamics.org/society.htm
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